Efficient Managerial Decision-Making in Healthcare Settings: Examples and Fundamental Principles

Efficient Managerial Decision-Making in Healthcare Settings: Examples and Fundamental Principles

Alexander Kolker
DOI: 10.4018/978-1-60960-872-9.ch001
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Traditional managerial decision-making and management engineering methodology are discussed and applied side by side to analyze the same problems in order to illustrate and explain their differences. Some fundamental management engineering principles are summarized in conclusion.
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The irony of the Information Age is that it has given new respectability to uninformed opinion.

Michael Crichton, Airframe, New York, 1996



Modern medicine has achieved great progress in treating individual patients. This progress is based mainly on life science (molecular genetics, biophysics, biochemistry) and the development of medical devices and imaging technology.

However, according to a report published jointly by National Academy of Engineering and Institute of Medicine, relatively little material resources and technical talent have been devoted to the proper functioning of the overall health care delivery as an integrated system in which access to efficient care should be delivered to many thousands of patients in an economically sustainable way (Reid et al, 2005).

As this report strongly points out, a real impact on quality, efficiency and sustainability of the health care system can be achieved only by using methods and principles of system engineering or healthcare delivery engineering (Reid et al, 2005).

At the same time, this report states in an unusually blunt way, “In fact, relatively few health care professionals or administrators are equipped to think analytically about health care delivery as a system or to appreciate the relevance of engineering tools. Even fewer are equipped to work with engineers to apply these tools.”

Thus, it is often difficult for many administrators to appreciate the role of management engineering methodology to the health care delivery process analysis. On the other hand, engineering professionals do not always have enough knowledge of health care delivery processes or the role of the physicians in making management decisions. Healthcare has a culture of rigid division of labor. This functional division does not effectively support the methodology that crosses the functional areas, especially if it assumes significant change in traditional relationships (Reid et al, 2005).

A systematic way of developing managerial decisions for efficient allocating of material, human and financial resources needed for delivery of high quality care using quantitative methods is the scope of what is called healthcare management engineering. (The term ‘management engineering’ is sometimes substituted by the terms ‘operations research’, ‘system engineering’, ‘industrial engineering’, or ‘management science’. All these terms have practically the same meaning).

Management engineering methodology is indispensable in addressing typical pressing hospital issues, such as:

  • Capacity: How many beds are required for a department or unit? How many procedure rooms, operating rooms or pieces of equipment are needed for different services?

  • Staffing: How many nurses, physicians and other providers are needed for a particular shift in a unit (department) in order to best achieve operational and service performance objectives?

  • Scheduling: What are the optimized staff schedules that help not only delivering a safe and efficient care for patients but also take into account staff preferences and convenience?

  • Patient flow: What patient wait time at the service stations is acceptable (if any at all) in order to achieve the system throughput goals?

  • Resource allocation: Is it more efficient to use specialized resources or pooled (interchangeable) resources (operating/procedure rooms, beds, equipment, and staff)?

  • Forecasting: How to forecast the future patient volumes (demand) or transaction volumes for the short- and long-term budget and other planning purposes?

This list can easily be extended. Other issues that belong to the management engineering domain are, for example, optimized geographic location of facilities and facilities layout, engineering (design) of the facility optimized workflow, defining and measuring productivity, supply chain and inventory management, quality control techniques, advanced multivariate statistical data analysis for marketing and budgeting purposes, and so on. The ultimate goal of management engineering methodology is providing an aid and guidance to efficiently managing hospital operations, i.e. reducing the costs of using resources for delivery of care while keeping high quality, safety and outcomes standards for patients.

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